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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI RAKESH MISHRA
PER BENCH: This is a batch of four appeals for the Assessment Years 2012-13 to 2015-16. All the appeals were heard together on account of common issues and are being disposed of vide a common order for the sake of convenience and brevity. The revenue has also filed cross appeals for both the years and since some of the issues there are different, they would be disposed of separately We would first take up both the appeals for AY 2012-13.
I. ITA No. 1010/Mum/2019, (AY 2012-13): This appeal pertaining to the Assessment Year 2012-13 is arising from the order dated 31.01.2019, passed by the Ld. Commissioner of Income Tax (Appeals)-22, Kolkata [hereinafter referred to as ‘the Ld. CIT(A)’] who partly allowed the appeal preferred by the assessee against the Assessment Order dated 08.04.2016 which was passed under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] by the Jt. Commissioner of Income Tax 10(1), Kolkata/the Ld. Assessing Officer (“the Ld. AO”).
The assessee has raised the following grounds of appeal in ITA No. 1010/Kol/2019 for AY 2012-13, each of which contains several sub- grounds:
“1. 1.1 On fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) – 22, Kolkata ('CIT(A)') erred in confirming disallowance in
3 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 respect of expenses incurred on Repairs and Maintenance of Rs. 9.59 lacs (being 10% of the total disallowance made by the AO) on ad-hoc basis on the alleged ground that the same were capital in nature. 1.2 He failed to appreciate and ought to have held that the expenditure was incurred wholly and exclusively for the business of Appellant in connection with minor repairs and there was no benefit of enduring nature by incurring such expenditure. 1.3 The Appellant prays that the said disallowance of Rs. 9.59 lacs be deleted. 2 2.1 On fact and circumstances of the case and in law, the CIT(A) erred in rejecting the revised disallowance of Rs. 0.19 lacs offered u/s 14A of the Income Tax Act, 1961 ("the Act") read with Rule 8D of Income Tax Rules, 1962 ("the Rules") during the appellate proceedings and confirmed the disallowance of Rs. 5.53 lacs offered in the return of income. 2.2 He failed to appreciate and ought to have held that it is the duty of the tax department to assess correct income and hence revised working ought to have been considered. 2.3 The Appellant prays that the AO be directed to compute disallowance u/s 14A r.w. Rule 8D(2)(iii) by considering only Indian investments from which exempt income is earned. 3. 3.1 On fact and circumstances of the case and in law, the CIT(A) erred in confirming the addition of disallowance under section 14A of the Act read with Rule 8D of the Rules to the extent of Rs. 5.53 lacs (as offered in the return of income) to 'book profits' under the provisions of 115JB of the Act. 3.2 He failed to appreciate and ought to have held that disallowance u/s 14A of the Act read with Rule 8D of the Rules are only for computing taxable income as per normal provisions of the Act and not for book profits u/s 115JB of the Act. 3.3 The Appellant prays that the AO be directed to delete the additions of Rs. 5.53 lacs under MAT. 3.4 Without prejudice to the above, the disallowance be restricted to the revised computation offered by the Appellant. 4. 4.1 On fact and circumstances of the case and in law, the CIT(A) erred in holding that corporate guarantee given by the appellant in respect of the loan given by the lenders to its Associate Enterprise ("AE") is an 'international transaction' and directing the AO to restrict the disallowance to 1% of the guarantee amount. 4.2 He failed to appreciate and ought to have held that mere issuance of corporate guarantee is not an 'international transaction'. 4.3 The Appellant prays that the AO be directed to delete the transfer pricing adjustment on account of corporate guarantee. 4.4 Without prejudice to the above, the rate of corporate guarantee commission be reduced reasonably.
4 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 5. General The Appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of aforesaid matter.” 3. Brief facts of the case are that the assessee is a Company engaged in the business of trading and servicing of vacuum cleaners, water filters cum purifiers, water & water treatment plant, electronic air cleaning systems, small household appliances and digital security system, etc. The assessee had filed its return of income for the A.Y. 2012-13 on November 30, 2012 declaring total income of Rs. 28,94,75,270/-. The return was selected for scrutiny assessment and notices u/s 143(2) and 142(1) of the Act were served upon the assessee. In respect of the international transactions entered during the assessment year, a reference was made to the Transfer Pricing Officer, Kolkata ("TPO") u/s 92CA(1) of the Act. The TPO computed the Arm's Length Price and passed an order u/s 92CA(3) of the Act on January 25, 2016. On receipt of the TPO's order, the Draft Assessment Order was passed on 10.03.2016 and sent to the assessee. Vide letter dated 22nd March 2016, the assessee stated that it was not filing any application with the Dispute Resolution Panel against the Draft Assessment Order and would prefer appeal before the CIT(A). Thereafter, the Final Assessment Order u/s 143(3) r.w.s. 144C of the Act was passed on April 8, 2016 assessing the total income at Rs. 52,72,64,911/-. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A) who allowed partial reliefs to the assessee. Aggrieved with the order of the Ld. CIT(A), both the assessee as well as the revenue have filed this appeal before the Tribunal.
The assessee has filed a written submission and a tabular chart highlighting the similar issues and the details of issues covered in the past. In the written submissions filed, it has been stated as under: 1. The instant appeals by the assessee and the Department are against four appellate orders of the Commissioner of Income Tax (Appeals)-22, Kolkata [in short, "CIT(A)") dated May 18, 2016, January 31, 2019, January 31, 2019 and May 22, 2019 for the Assessment Years 2012-13, 2013-14, 2014-15 and 2015-16
5 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 respectively (hereinafter referred to as the "said orders"). Most of the issues involved in the four appeals are common. 2. The four appeals filed by the assessee against the said orders of the CIT(A) contain the following three common grounds: (a) On fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-22, Kolkata erred in rejecting the revised disallowance of Rs. 0.19 lakhs/Rs. 0.07 lakhs/Rs. 0.06 lakhs offered under Section 14A of the Income Tax Act, 1961 ("the Act") read with Rule 8D of the Income Tax Rules, 1962 ("the Rules" during the appellate proceedings and confirmed the disallowance of Rs. 9.59 lakhs/Rs. 4.19 lakhs/Rs. 0.49 lakhs in the return of income. (Ground No. 2 in ITA 1010/Kol/2019, ITA 1012/Kol/2019 & ITA 1701/Kol/2019; Ground No. 1 in ITA 1011/Kol/2019) (b) On fact and circumstances of the case and in law, the CIT(A) erred in confirming the addition of disallowance under Section 14A of the Act read with Rule 8D of the Rules to the extent of Rs. 5.53 lakhs/Rs. 4.19 lakhs/Rs. 0.49 lakhs (as offered in the return of income) to 'book profits' under the provisions of Section 115JB of the Act. Ground No. 3 in ITA 1010/Kol/2019, ITA 1012/Kol/2019 & ITA 1701/Kol/2019, Ground No. 2 in ITA 1011/Kol/2019) (c) On fact and circumstances of the case and in law, the CIT(A) erred in holding that corporate guarantee ("CG") given by the appellant in respect of the loan given by the lenders of its Associate Enterprise ("AE") is an international transaction' [and directing the AO to restrict the disallowance to 1% of the guarantee amount (in ITA No. 1701/Kol/2019)]. (Ground No. 4 in ITA 1010/Kol/2019, ITA 1012/Kol/2019 & ΙΤΑ 1701/Kol/2019; Ground No. 3 in ITA 1011/Kol/2019) 2.1 In the appeals for the AYs 2012-13, 2014-15 and 2015-16 there is an additional ground, which is as follows: (d) On fact and circumstances of the case and in law, the CIT(A) erred in confirming disallowance in respect of expenses incurred on Repairs and Maintenance of Rs. 9.59 lakhs/Rs. 4.54 lakhs (being 10% of the total disallowance made by the AO) on ad hoc basis on the alleged ground that the same were capital in nature. Ground No. 1 in ITA 1010/Kol/2019, ITA 1012/Kol/2019 & ITA 1701/Kol/2019) Ground wise submissions have also been made subsequently in the written submission and the tabular chart filed and the details of the results of the past appeals detailing the covered issues are mentioned. 5. At the outset of the hearing of the appeal of the assessee, the Ld. AR stated that he was not pressing Ground Nos. 1, 2, 3 and 4 in the appeals filed by the assessee for AY 2012-13 and similar Grounds of Appeal in the
6 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 appeal of the assessee for the other AYs. It was observed that the Ld. CIT(A) had decided the appeal and the issues were covered in favour of the assessee on the basis of the decisions of the Tribunal in the past years. Since the assessee has not pressed any of the grounds of appeal in this year as well as in the other years as applicable, these grounds of appeal become infructuous and are dismissed as ‘Not Pressed’. Hence, the appeal filed by the assessee for AY 2012-13 is dismissed as ‘Not Pressed’. 6. The Grounds of appeal in the other three appeals are also similar to the grounds raised in the appeal for AY 2012-13 and are as under: II. ITA No. 1011/Kol/2019, AY 2013-14:
“1. 1.1 On fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-22, Kolkata ("CIT(A)") erred in rejecting the revised disallowance of Rs. 0.07 lacs offered u/s 14A of the Income Tax Act, 1961 ("the Act") read with Rule 8D of Income Tax Rules, 1962 ("the Rules") during the appellate proceedings and confirmed the disallowance of Rs. 4.19 lacs offered in the return of income. 1.2 He failed to appreciate and ought to have held that it is the duty of the tax department to assess correct income and hence revised working ought to have been considered. 1.3 The Appellant prays that the AO be directed to compute disallowance u/s 14A r.w. Rule 8D(2)(iii) by considering only Indian investments from which exempt income is earned. 2. 2.1 On fact and circumstances of the case and in law, the CIT(A) erred in confirming the addition of disallowance under section 14A of the Act read with Rule 8D of the Rules to the extent of Rs. 4.19 lacs (as offered in the return of income) to "book profits' under the provisions of 115JB of the Act. 2.2 He failed to appreciate and ought to have held that disallowance u/s 14A of the Act read with Rule 8D of the Rules are only for computing taxable income as per normal provisions of the Act and not for book profits u/s 115JB of the Act. 2.3 The Appellant prays that the AO be directed to delete the additions of Rs. 4.19 lacs under MAT. 2.4 Without prejudice to the above, the disallowance be restricted to the revised computation offered by the Appellant. 3. 3.1 On fact and circumstances of the case and in law, the CIT(A) erred in holding that corporate guarantee given by the appellant in respect of the loan given by the lenders to its Associate Enterprise ("AE") is an 'international transaction'.
7 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 3.2 He failed to appreciate and ought to have held that mere issuance of corporate guarantee is not an 'international transaction". 3.3 The Appellant prays that the AO be directed to delete the suo- motu adjustment offered by the Appellant. 3.4 Without prejudice to the above, the rate of corporate guarantee commission be reduced reasonably. 4. General The Appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of aforesaid matter.”
III. ITA No. 1012/Kol/2019, AY 2014-15:
“1. 1.1 On fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) 22, Kolkata ('CIT(A)') erred in confirming disallowance in respect of expenses incurred on Repairs and Maintenance of Rs. 4.54 lacs (being 10% of the total disallowance made by the AO) on ad- hoc basis on the alleged ground that the same were capital in nature. 1.2 He failed to appreciate and ought to have held that the expenditure was incurred wholly and exclusively for the business of Appellant in connection with minor repairs and there was no benefit of enduring nature by incurring such expenditure. 1.3 The Appellant prays that the said disallowance of Rs. 4.54 lacs be deleted.
2.1 On fact and circumstances of the case and in law, the CIT(A) erred in rejecting the revised disallowance of Rs. 0.06 lacs offered u/s 14A of the Income Tax Act, 1961 ("the Act") read with Rule SD of Income Tax Rules, 1962 ("the Rules") during the appellate proceedings and confirmed the disallowance of Rs. 0.49 lacs offered in the return of income. 2.2 He failed to appreciate and ought to have held that it is the duty of the tax department to assess correct income and hence revised working ought to have been considered. 2.3 The Appellant prays that the AO be directed to compute disallowance u/s 14A r.w. Rule 8D(2)(iii) by considering only Indian investments from which exempt income is earned. 3. 3.1 On fact and circumstances of the case and in law, the CIT(A) erred in confirming the addition of disallowance under section 14A of the Act read with Rule 8D of the Rules to the extent of Rs. 0.49 lacs (as offered in the return of income) to 'book profits' under the provisions of 115JB of the Act.
8 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 3.2 He failed to appreciate and ought to have held that disallowance u/s 14A of the Act read with Rule 8D of the Rules are only for computing taxable income as per normal provisions of the Act and not for book profits u/s 115JB of the Act. 3.3 The Appellant prays that the AO be directed to delete the additions of Rs. 0.49 lacs under MAT. 3.4 Without prejudice to the above, the disallowance be restricted to the revised computation offered by the Appellant. 4. 4.1 On fact and circumstances of the case and in law, the CIT(A) erred in holding that corporate guarantee given by the appellant in respect of the loan given by the lenders to its Associate Enterprise ("AE") is an 'international transaction and directing the AO to restrict the disallowance to 1% of the guarantee amount. 4.2 He failed to appreciate and ought to have held that mere issuance of corporate guarantee is not an 'international transaction'. 4.3 The Appellant prays that the AO be directed to delete the transfer pricing adjustment on account of corporate guarantee. 4.4 Without prejudice to the above, the rate of corporate guarantee commission be reduced reasonably. 5. General The Appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of aforesaid matter.” IV. ITA No. 1701/Kol/2019:
“1. 1.1 On fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) 22, Kolkata ('CIT(A)') erred in confirming disallowance in respect of expenses incurred on Repairs and Maintenance of Rs. 5.19 lacs (being 10% of the total disallowance made by the AO) on ad- hoc basis on the alleged ground that the same were capital in nature. 1.2 He failed to appreciate and ought to have held that the expenditure was incurred wholly and exclusively for the business of Appellant in connection with minor repairs and there was no benefit of enduring nature by incurring such expenditure. 1.3 The Appellant prays that the said disallowance of Rs. 5.19 lacs be deleted. 2. 2.1 On fact and circumstances of the case and in law, the CIT(A) erred in rejecting the revised disallowance of Rs. 0.06 lacs offered u/s 14A of the Income Tax Act, 1961 ("the Act") read with Rule 8D of Income Tax Rules, 1962 ("the Rules") during the appellate proceedings and confirmed the disallowance of Rs. 2.12 lacs offered in the return of income. 2.2 He failed to appreciate and ought to have held that it is the duty of the tax department to assess correct income and hence revised working ought to have been considered.
9 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16
2.3 The Appellant prays that the AO be directed to compute disallowance u/s 14A r.w. Rule 8D(2)(iii) by considering only Indian investments from which exempt income is earned. 3. 3.1 On fact and circumstances of the case and in law, the CIT(A) erred in confirming the addition of disallowance under section 14A of the Act read with Rule 8D of the Rules to the extent of Rs. 2.12 lacs (as offered in the return of income) to 'book profits' under the provisions of 115JB of the Act. 3.2 He failed to appreciate and ought to have held that disallowance u/s 14A of the Act read with Rule 8D of the Rules are only for computing taxable income as per normal provisions of the Act and not for book profits u/s 115JB of the Act. 3.3 The Appellant prays that the AO be directed to delete the additions of Rs. 2.12 lacs under MAT. 3.4 Without prejudice to the above, the disallowance be restricted to the revised computation offered by the Appellant. 4. 4.1 On fact and circumstances of the case and in law, the CIT(A) 40 erred in holding that corporate guarantee given by the appellant in respect of the loan given by the lenders to its Associate Enterprise ("AE") is an 'international transaction' and directing the AO to restrict the disallowance to 1% of the guarantee amount. 4.2 He failed to appreciate and ought to have held that mere issuance of corporate guarantee is not an 'international transaction'. 4.3 The Appellant prays that the AO be directed to delete the transfer pricing adjustment on account of corporate guarantee. 4.4 Without prejudice to the above, the rate of corporate guarantee commission be reduced reasonably. 5. General The Appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of aforesaid matter.” 7. Since the Grounds of Appeal in respect of the assessee’s appeals for AYs 2013-14, 2014-15 and 2015-16 are similar to the Grounds of Appeal for AY 2012-13 except for the ground relating to confirmation of 10% of disallowance of Repairs and Maintenance expenses claimed not being applicable for AY 2013-14, hence in view of the findings in Para 5, all the grounds of Appeal relating to the appeal for the AYs 2013-14, 2014-15 and 2015-16 as well also become infructuous and are dismissed as ‘Not Pressed’ and the appeals for these three assessment years as well are also dismissed as ‘Not Pressed’.
10 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16
In the result, all the four appeals filed by the assessee for AYs 2012-13, 2013-14, 2014-15 and 2015-16 are dismissed as ‘Not Pressed’.
Orders pronounced in the open court on 8th October, 2024.
Sd/- Sd/- (Sanjay Garg) (Rakesh Mishra) Judicial Member Accountant Member
Dated: 8th October, 2024 AK, P.S.
11 ITA Nos. 1010-1012 & 1701/Kol/2019 AYs: 2012-13 to 2015-16 Copy to: 1. The Appellant: 2. The Respondent. 3. CIT(A) 4. The CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata